PayPal (PYPL) Q3 2024 Earnings

PayPal reported better-than-expected third-quarter results on Tuesday, but revenue fell slightly short of expectations. Shares traded lower premarket.

Here's how the company performed compared to Wall Street estimates, based on an analyst survey by LSEG:

• Earnings per share: $1.20, adjusted versus $1.07 expected
• Revenue: $7.85 billion versus expected $7.89 billion

Revenue increased about 6% in the quarter from $7.42 billion in the same period last year. PayPal reported net income of $1.01 billion, or 99 cents per share, compared with $1.02 billion, or 93 cents per share, a year earlier.

It's the first earnings report for CEO Alex Chriss since he completed his one-year term in September. The stock is up 36% this year and 42% since Chriss joined the payments company, which was in slump at the time due to increasing competition and a declining take rate, or the percentage of revenue that PayPal keeps from each transaction There was a break-in.

Chriss has focused on prioritizing profitable growth and better monetizing key acquisitions like Braintree, used by Meta for credit card processing, and payments app Venmo.

Total payment volume, an indicator of the development of digital payments in the broader economy, rose 9% to $422.6 billion in the quarter ended Sept. 30 compared to a year earlier, just above the average analyst estimate of $422.5 billion. Dollar Street Account.

“PayPal delivered strong financial and operating results in an extremely productive third quarter,” Chriss said in the earnings release.

The company's operating margin was 18.8%, beating the StreetAccount estimate of 17.4%. PayPal reported a total of 432 million active accounts, up 1% year over year and beating the average estimate of 430.5 million.

While PayPal's take rate fell to 1.86% from 1.91% a year ago, the transaction margin, by which the company measures the profitability of its core business, rose from 45.4% to 46.6%.

PayPal expects “low single-digit growth” for the fourth quarter. Analysts expected growth of 5.4% to $8.46 billion. The investor overview states that the guidance reflects a “price-value strategy and prioritization of profitable growth.”

According to LSEG, the company expects adjusted earnings per share of $1.07 to $1.11, versus the average analyst estimate of $1.10.

One of Chriss' strategies to address declining margins was to offer retailers more value-added services, such as connecting some data points at checkout to reduce cart abandonment rates. This product, called Fastlane, was launched in August and is a one-click payment option for online sales that can compete Apple Pay and shop Pay with Shopify.

In August, fintech platform Adyen made Fastlane available to businesses in the US and announced that it plans to expand the offering globally in the future. The company has also worked with other global commerce leaders, including Fiserv, Amazon, Global Payments and Shopify, to expand its share of online checkouts.

The other big product launch in the quarter was PayPal Everywhere, which went live in early September. The initiative offers 5% cashback for using a PayPal debit card on the mobile app. To date, PayPal has recorded 1 million new PayPal debit card registrations.

Venmo's total payment volume increased 8% year-over-year in the quarter. DoorDash, Starbucks and Ticketmaster are among the companies that now accept Venmo as a payment method for consumers.

“We are making solid progress in our transformation by bringing new innovations to market, forging key partnerships with leading retail players and increasing awareness and engagement through new marketing campaigns,” Chriss said in the press release.

PayPal will hold an earnings call for analysts at 8 a.m. Eastern Time.

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